The Michaels Companies Announces Third Quarter Fiscal 2016 Financial Results and Increase of Share Repurchase Program

• Total net sales increased 5.0%; comparable store sales decreased
  2.0%
• Operating income of $146.3 million compared to $155.9 million in
  fiscal 2015; adjusted operating income of $148.6 million
• Diluted EPS of $0.37 compared to $0.37 in fiscal 2015; adjusted
  diluted EPS of $0.40
• Management provides updated guidance for fiscal 2016 adjusted
  diluted EPS to be between $1.86 and $1.90 compared to $1.72 in fiscal
  2015
• Board of Directors Increases Share Repurchase Authorization by $300
  million

IRVING, Texas–(BUSINESS WIRE)–The Michaels Companies, Inc. (NASDAQ: MIK) today announced financial
results for the third quarter ended October 29, 2016.

“In a tough environment, I am encouraged we continued to increase
adjusted net income, gain market share, and invest to support our
long-term strategy. We are disappointed our plans did not result in
expected comp and earnings growth, and we have taken steps to position
the fourth quarter for better performance,” said Chuck Rubin, Chairman
and Chief Executive Officer. “We are the leader in the channel, and we
have a strong financial model with consistent cash flows. Although the
industry may be facing some temporary headwinds, we intend to leverage
our leadership position to continue to expand our market share while
continuing to return cash to shareholders.”

Third Quarter Highlights

• Net sales increased 5.0% to $1.227 billion, from $1.168 billion in the
  third quarter of fiscal 2015. The increase was primarily a result of
  the acquisition of Lamrite West in February 2016 and sales from 19
  additional stores (net of closures). Comparable store sales decreased
  2.0% driven by a decrease in customer transactions, which was
  partially offset by an increase in average ticket.
• Gross profit increased 0.2% to $466.6 million, from $465.6 million in
  the third quarter of fiscal 2015. As a percentage of net sales, gross
  profit was 38.0% compared to 39.8% in the third quarter of fiscal
  2015. The decrease, as a percentage of net sales, was due to a higher
  mix of sales from merchandise sold on promotion, the timing of
  distribution-related costs, and the acquisition of Lamrite West,
  including the impact of Lamrite West’s wholesale business, which has a
  lower gross margin rate than the Michaels business. The decrease, as a
  percentage of sales, was partially offset by improved sourcing and
  pricing efficiencies.
• Selling, general and administrative expense, including store
  pre-opening costs, (“SG&A”) increased 3.4% to $320.3 million, or 26.1%
  of sales, from $309.7 million, or 26.5% of sales, in the third quarter
  of fiscal 2015. The increase in SG&A was primarily due to $17.3
  million associated with the acquisition of Lamrite West, including
  $1.6 million of integration expenses; expenses associated with the
  operation of 19 additional stores (net of closures); and higher
  professional fees. The increase was partially offset by a decrease in
  incentive-based compensation and lower marketing expense.
• Operating income was $146.3 million, compared to $155.9 million in the
  third quarter of fiscal 2015. As a percent of net sales, operating
  income was 11.9% compared to 13.3% in the third quarter of fiscal
  2015. Excluding net non-recurring, inventory-related purchase
  accounting adjustments and integration expenses associated with the
  acquisition of Lamrite West, adjusted operating income was $148.6
  million, or 12.1% of net sales.
• Interest expense decreased $2.3 million to $31.5 million, from $33.8
  million in the third quarter of fiscal 2015 due to a voluntary
  principal payment of $150.0 million on the term loan credit facility
  in the fourth quarter of fiscal 2015 and interest rate savings from
  the refinancing of the revolving credit facility. The Company recorded
  a loss on the early extinguishment of debt of $6.9 million during the
  third quarter of fiscal 2016 related to the refinancing of the term
  loan credit facility in September 2016.
• The effective tax rate was 29.0% for the third quarter of fiscal 2016,
  compared to 37.0% for the third quarter of fiscal 2015. The lower
  effective tax rate is primarily due to benefits realized from our
  direct sourcing initiatives, certain federal tax credits and a
  decrease in state taxes.

• Net income was $76.5 million, compared to $76.8 million in the third
  quarter of fiscal 2015. As a percent of net sales, net income was 6.2%
  compared to 6.6% in the third quarter of fiscal 2015. Excluding net
  non-recurring, inventory-related purchase accounting adjustments,
  integration expenses associated with the acquisition of Lamrite West,
  and losses on early extinguishments of debt and refinancing costs,
  adjusted net income for the third quarter of fiscal 2016 was $82.1
  million, or 6.7% of net sales.
• Diluted earnings per common share was $0.37, flat with the third
  quarter of fiscal 2015. Excluding net non-recurring, inventory-related
  purchase accounting adjustments, integration expenses associated with
  the acquisition of Lamrite West, and losses on early extinguishments
  of debt and refinancing costs, adjusted diluted earnings per common
  share for the third quarter was $0.40.
• During the third quarter of fiscal 2016, the Company opened 14 new
  Michaels stores, compared with 10 new Michaels store openings in the
  third quarter of 2015. At the end of the third quarter, the Company
  operated 1,221 Michaels stores, 112 Aaron Brothers stores, and 35 Pat
  Catan’s stores.
• The Company ended the third quarter of fiscal 2016 with $150.0 million
  in cash and cash equivalents, $2.8 billion in debt and $792.7 million
  in availability under its asset-based revolving credit facility.
• Inventory at the end of the third quarter increased $117.0 million, or
  9.2%, to $1.394 billion, compared to $1.277 billion at the end of the
  third quarter of fiscal 2015. The increase in inventory was due to
  $95.4 million in additional inventory from the acquisition of Lamrite
  West. Average Michaels inventory on a per store basis, inclusive of
  distribution centers, in transit and inventory for the Company’s
  e-commerce site, was flat compared to average inventory per store at
  the end of the third quarter of fiscal 2015.
• During the quarter, the Company purchased 1.2 million shares, or $29.5
  million, under its share repurchase authorization, previously
  announced in March 2016.

Share Repurchase Authorization

In December 2016, the Board of Directors authorized the Company to
purchase, from time to time, as market conditions warrant, $300 million
of the Company’s common stock, which is in addition to its prior
repurchase authorization. As of December 6, 2016, the total
authorization for future repurchases was approximately $343.5 million.
The share-repurchase program does not have an expiration date, and the
timing and number of repurchase transactions under the program will
depend on market conditions, corporate considerations, debt agreements,
and regulatory requirements.

Fourth Quarter and Fiscal Year 2016 Outlook:

For the fourth quarter of fiscal 2016, the Company expects:

• Comparable store sales growth to be flat to down 1.5%;
• Adjusted operating income of $335 million to $348 million;
• Interest expense to be approximately $31 million;
• The effective tax rate to be approximately 36%; and
• Adjusted diluted earnings per common share of $0.94 to $0.98, based on
  diluted weighted average common shares of 204 million.

For fiscal 2016, the Company expects:

• Comparable store sales to be approximately flat;
• Total net sales growth, including revenues from Lamrite West, of 5.8%
  to 6.2%;
• Approximately 1.3% sales growth from 22 net new store openings,
  including 3 new Pat Catan’s stores;
• Lamrite West to generate $225 million to $250 million in revenues;
• Adjusted operating income to be in the range of $724 million to $737
  million, excluding approximately $14 million to $15 million of
  integration costs and net non-recurring, inventory-related purchase
  accounting entries;
• Annual interest expense to be approximately $127 million;
• The effective tax rate to be approximately 35%;
• Adjusted diluted earnings per common share to be between $1.86 and
  $1.90, based on diluted weighted average common shares of
  approximately 207 million; and
• Capital expenditures of between $115 million and $125 million.

Conference Call Information

A conference call to discuss third quarter financial results is
scheduled for today, December 6, 2016, at 8:00 am CST. Analysts and
investors who would like to join the conference call are encouraged to
pre-register for the conference call using the following link: http://dpregister.com/10096593.
Callers who pre-register will be given a conference call passcode and a
unique PIN to gain immediate access to the call and bypass the live
operator. Participants may pre-register at any time, including up to and
after the call start time. Investors without internet access or who are
unable to pre-register can join the call by dialing (866) 777-2509 or
(412)-317-5413.

The conference call will also be webcast at http://investors.michaels.com/.
To listen to the live call, please go to the website at least 15 minutes
before the call is scheduled to begin to register and download any
necessary audio software. The webcast will be accessible for 30 days
after the call. Additionally, a telephone replay will be available until
December 13, 2016, by dialing (877) 344-7529 or (412) 317-0088, access
code 10096593.

Non-GAAP Information

This press release includes non-GAAP measures including Adjusted EBITDA;
operating income excluding integration costs and non-recurring,
inventory-related purchase accounting entries related to the acquisition
of Lamrite West (“Adjusted operating income”); net income excluding
integration costs, non-recurring, inventory-related purchase accounting
entries related to the acquisition of Lamrite West, and losses on early
extinguishments of debt and refinancing costs (“Adjusted net income”);
and earnings per share excluding integration costs, non-recurring,
inventory-related purchase accounting entries related to the acquisition
of Lamrite West, and losses on early extinguishments of debt and
refinancing costs (“Adjusted earnings per share”). The Company has
reconciled these non-GAAP financial measures with the most directly
comparable GAAP financial measures in a table accompanying this
release. The Company believes that these non-GAAP financial measures not
only provide its management with comparable financial data for internal
financial analysis but also provide meaningful supplemental information
to investors. Specifically, these non-GAAP financial measures allow
investors to better understand the performance of the Company’s business
and facilitate a meaningful evaluation of its quarterly and fiscal 2016
diluted earnings per common share and actual results on a comparable
basis with its quarterly and fiscal 2015 results.

In evaluating these non-GAAP financial measures, investors should be
aware that in the future the Company may incur expenses or be involved
in transactions that are the same as or similar to some of the
adjustments in this presentation. The Company’s presentation of non-GAAP
financial measures should not be construed to imply that its future
results will be unaffected by any such adjustments. The Company has
provided this information as a means to evaluate the results of its
ongoing operations. Other companies in the Company’s industry may
calculate these items differently than it does. Each of these measures
is not a measure of performance under GAAP and should not be considered
as a substitute for the most directly comparable financial measures
prepared in accordance with GAAP. Non-GAAP financial measures have
limitations as analytical tools, and investors should not consider them
in isolation or as a substitute for analysis of the Company’s results as
reported under GAAP.

Forward-Looking Statements

This news release includes forward-looking statements which reflect
management’s current views and estimates regarding the Company’s
industry, business strategy, goals and expectations concerning its
market position, future operations, margins, profitability, capital
expenditures, share repurchases, liquidity and capital resources, and
other financial and operating information. The words “anticipate,”
“assume,” “believe,” “continue,” “could,” “estimate,” “expect,”
“forecast,” “future,” “guidance,” “imply,” “intend,” “may,” “outlook,”
“plan,” “potential,” “predict,” “project,” and similar terms and phrases
are intended to identify forward-looking statements, although not all
forward-looking statements contain these identifying words. The Company
cannot assure investors that future developments affecting the Company
will be those that it has anticipated. Actual results may differ
materially from these expectations due to risks relating to the effect
of economic uncertainty, risks associated with our substantial
outstanding indebtedness of $2.8 billion, changes in customer demand,
risks relating to our failure to adequately maintain security and
prevent unauthorized access to electronic and other confidential
information, increased competition including internet-based competition
from other retailers, risks relating to our reliance on foreign
suppliers, risks relating to how well we manage our business, risks
related to our ability to open new stores and increase comparable store
sales growth, damage to the reputation of the Michaels brand or our
private and exclusive brands, risks associated with executing or
integrating an acquisition, a business combination or major business
initiative, and other risks and uncertainties including those identified
under the heading “Risk Factors” in the Company’s Annual Report on Form
10-K filed with the Securities and Exchange Commission (“SEC”), which is
available at www.sec.gov,
and other filings that the Company may make with the SEC in the future.
If one or more of these risks or uncertainties materialize, or if any of
the Company’s assumptions prove incorrect, the Company’s actual results
may vary in material respects from those projected in these
forward-looking statements. Any forward-looking statement made by the
Company in this news release speaks only as of the date on which the
Company makes it. Factors or events that could cause the Company’s
actual results to differ may emerge from time to time, and it is not
possible for the Company to predict all of them. The Company does not
undertake and specifically disclaims any obligation to publicly update
or revise any forward-looking statement, whether as a result of new
information, future developments or otherwise, except as may be required
by any applicable securities laws.

About The Michaels Companies, Inc.:

The Michaels Companies, Inc. is North America’s largest specialty
provider of arts, crafts, framing, floral, wall décor, and seasonal
merchandise for the hobbyist and do-it-yourself home decorator. As of
October 29, 2016, the Company owned and operated 1,368 stores in 49
states and Canada under the brands Michaels, Aaron Brothers, and Pat
Catan’s. The Michaels Companies, Inc., also owns Artistree, a
manufacturer of high quality custom and specialty framing merchandise,
and Darice, a premier wholesale distributor in the craft, gift and decor
industry. The Michaels Companies, Inc. produces a number of exclusive
private brands including Recollections®, Studio Decor™, Bead Landing®,
Creatology®, Ashland®, Celebrate It®, Art Minds®, Artist’s Loft®, Craft
Smart®, Loops & Threads®, Make Market®, Foamies®, LockerLookz®, and
Sticky Sticks®. Learn more about Michaels at www.michaels.com.

The Michaels Companies, Inc.
Summary of Operating Data
(Unaudited)
The following table sets forth certain of our unaudited operating data:
				13 Weeks Ended										39 Weeks Ended
				October 29,					October 31,					October 29,					October 31,
				2016					2015					2016					2015
Michaels stores:
Open at beginning of period					1,209					1,186					1,196					1,168
New stores					14					10					30					29
Relocated stores opened					4					4					14					17
Closed stores					(2	)				—					(5	)				(1	)
Relocated stores closed					(4	)				(4	)				(14	)				(17	)
Michaels stores open at end of period					1,221					1,196					1,221					1,196
Aaron Brothers stores:
Open at beginning of period					112					118					117					120
Closed stores					—					—					(5	)				(2	)
Aaron Brothers stores open at end of period					112					118					112					118
Pat Catan’s stores:
Open at beginning of period					35					—					—					—
Acquired stores					—					—					32					—
New stores					—					—					3					—
Pat Catan’s stores open at end of period					35					—					35					—
Total store count at end of period					1,368					1,314					1,368					1,314
Other Operating Data:
Average inventory per Michaels store (in thousands)1				$	1,040				$	1,041				$	1,040				$	1,041
Comparable store sales					-2.0	%				1.5	%				-0.2	%				1.1	%
Comparable store sales, at constant currency					-2.0	%				3.1	%				0.1	%				2.5	%
1 The calculation of average inventory per Michaels store excludes our Aaron Brothers and Pat Catan’s stores.       The Michaels Companies, Inc. Reconciliation of Adjusted EBITDA (Excluding losses on early extinguishments of debt and refinancing costs) (Unaudited)                   13 Weeks Ended 39 Weeks Ended October 29, October 31, October 29, October 31, (in thousands) 2016 2015 2016 2015 Net cash provided by operating activities $ 160,940 $ 100,941 $ 136,516 $ 17,870 Depreciation and amortization (28,211 ) (29,433 ) (86,679 ) (85,382 ) Share-based compensation (5,294 ) (3,258 ) (11,884 ) (9,483 ) Debt issuance costs amortization (1,548 ) (2,089 ) (5,308 ) (6,455 ) Accretion of long-term debt, net 93 32 217 98 Deferred income taxes (9,487 ) (1,039 ) (10,106 ) (7,553 ) Losses on early extinguishments of debt and refinancing costs (6,887 ) — (7,292 ) (6,072 ) Losses on disposition of property and equipment (21 ) — (56 ) — Excess tax benefits from share-based compensation 214 1,087 7,485 14,039 Changes in assets and liabilities   (33,340 )   10,556     159,948     262,184   Net income 76,459 76,797 182,841 179,246 Interest expense 31,538 33,840 95,711 105,967 Losses on early extinguishments of debt and refinancing costs 6,887 — 7,292 6,072 Provision for income taxes 31,181 45,103 92,692 104,960 Depreciation and amortization 28,211 29,433 86,679 85,382 Interest income   (68 )   (46 )   (521 )   (226 ) EBITDA (excluding losses on early extinguishments of debt and refinancing costs) 174,208 185,127 464,694 481,401 Adjustments: Share-based compensation 5,294 3,258 11,884 9,483 Severance costs 2,181 331 3,101 1,493 Store pre-opening costs 1,716 1,059 4,284 4,369 Store remodel costs 905 315 895 2,142 Foreign currency transaction losses 146 137 694 114 Store closing costs 924 449 3,076 88 Lamrite integration costs 1,586 — 7,605 — Other (a)   898     436     2,424     2,912   Adjusted EBITDA $ 187,858   $ 191,112   $ 498,657   $ 502,002     (a) Other adjustments primarily relate to items such as moving and relocation expenses, franchise taxes, sign on bonuses, and certain legal expenses. Contacts Investor Contacts: The Michaels Companies, Inc. Kiley F. Rawlins, CFA, 972-409-7404 Kiley.Rawlins@michaels.com or ICR, Inc. Farah Soi / Anne Rakunas, 203-682-8200 Farah.Soi@icrinc.com / Anne.Rakunas@icrinc.com or Financial Media Contact: ICR, Inc. Jessica Liddell, 203-682-8200 Julia Young, 203-682-8208 Michaels@icrinc.com Read full story here Recibe gratis todas las noticias en tu correo Suscribirme Este sitio está protegido por reCAPTCHA y Google Política de privacidad y Se aplican las Condiciones de servicio. ¡Muchas gracias! 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